Crude oil prices are on a path to highs not seen since 2014, according to one chart analyst.
As the energy sector tracks for its best quarter on record with a year-to-date gain of nearly 40%, there’s “clearly some upside” for oil prices as well, Piper Sandler’s Craig Johnson told CNBC’s “Trading Nation” on Friday.
U.S. West Texas Intermediate crude prices slid half of 1% to around $65.60 a barrel on Friday.
“I could actually see a number that could be north of 100 in the next, say, six to … 12 months from here,” said Johnson, his firm’s senior technical research analyst.
The Energy Select Sector SPDR Fund (XLE) is also showing signs of life after a difficult 2020, he said.
“There is clearly a double bottom that has been made and even a higher low that has been made,” he said, citing a chart of the 23-stock exchange-traded fund.
“We’re getting a multi-year reversal in terms of the performance of the XLE compared to the S&P 500. Clearly, there are some very positive trends happening here,” he said. “These are longer-term themes and trends that are starting to unfold.”
One smaller name could see outsized benefits from those trends, Johnson said.
“Don’t forget about the mid- and small-cap stocks, too, because they’re also participating in the action,” he said, pointing to a chart of exploration and production company Cimarex Energy.
“To us, it looks like you could have more than 40% upside to get back to the old highs in 2018,” he said.
Cimarex shares closed nearly 2% lower at $65.14 on Friday. A 40% run from those levels would bring the stock to around $91.20 a share.
With OPEC likely to keep production steady until at least the summer, Laffer Tengler Investments’ Nancy Tengler was also expecting a surge in oil prices.
“We don’t see any supply increase until October, which means the price of oil can run pretty handily from here. Our expectations are somewhere around $80 a barrel in the summer, so, that’s bullish for most of the oil stocks,” she said in the same “Trading Nation” interview.
Tengler’s firm owns Chevron, which she called “best in class in the integrated space,” Diamondback Energy, Phillips 66 and a few other stocks in the space — and she plans to exercise caution going forward.
“Those stocks have run dramatically,” she said, highlighting Diamondback’s 69.5% run this year. “When it’s time — and we don’t think it is time — we think you fade some of those stocks that are highly leveraged to the price of oil and you hold onto quality in the second half of the year, and that would be something like Chevron.”
JPMorgan named Chevron and Exxon Mobil its top picks among the oil “majors” on Friday, citing greater cost efficiency and saying balance sheet leverage could return to pre-pandemic levels this year.
Disclosure: Laffer Tengler Investments owns shares of Chevron, Diamondback Energy and Phillips 66.
